The much-anticipated auction of Whistlejacket's $6bn portfolio of so-called "toxic assets" went very well, fetching an average price of 67 cents on the dollar. Whistlejacket was a large structured investment vehicle (SIV) that failed in February 2008 when its sponsor, Standard Charter, stopped providing liquidity. Whistlejacket's portfolio included CDOs backed by mortgage bonds, CLOs, consumer ABS—pretty much a who's who of "toxic assets." The auction included well over $500 million of CDOs that were issued in 2006-2007. Even the CLOs, which are structured products backed by leveraged loans, went for an average price of 70 cents on the dollar. This was easily the biggest secondary-market sale of toxic assets in the past year, and probably the biggest since mid-2007, so the market was watching the auction very closely, looking for some guidance on pricing for toxic assets. The 33% discount price was much better than most people were anticipating. Overall, I'd say the auction lends support to Treasury's argument that a lack of liquidity is artificially depressing the prices of toxic assets. Chalk one up for Tim Geithner.


Anonymous said...

This story is akin to those stories that the Bushies would plant on CNN about school buildings being painted in Iraq or some soccer game being played in Bagdad to show the great success of the US invasion of Iraq.

This story has all the traits of a "PR Auction" to lure gullible buyers to bidding for other junk.

In the past two weeks alone, I've seen 100% write downs on other CDO tranches (write downs that total in the billions).

Anonymous said...

Let's bring back a mark-to-market accounting!

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